Upstox Co-founder and CEO, Ravi Kumar, recently authored an article in The Economic Times on why how retail investors will be driving the growth story in 2023.
The article covers 4 key magic ingredients of the Indian investment flywheel and how the growth in the economy and corporate India will be mirrored back in the growth of the personal wealth of the average Indian.
The aam aadmi are the driving force behind a paradigm shift in the Indian economy: Equity markets are being taken over by retail investors, who are creating wealth for themselves and the nation. An “India Investment Flywheel” is just beginning to turn at this point.
The India Investment Flywheel
Imagine if household savings of trillions of rupees that are primarily held in physical assets could be utilized to propel the economy forward. Indians putting resources into the development of Indian organizations. The average Indian’s personal wealth will then increase in tandem with the expansion of Corporate India and the Indian economy. Our honorable Prime Minister’s vision of Aatmanirbhar Bharat may come true in this way. Additionally, and we are well underway on this journey.
As per RBI data, Indian families have shown a 2.5x jump in mutual fund investments in FY22 vs FY21. Over 10 million new investors started an SIP and have invested a total of ₹1.2 trillion in FY22. Since March 2022, the US Fed has hiked rates by 4.25%. With the rupee weakening, FIIs (foreign institutional investors) have pulled out from emerging markets like India.
FIIs have been net sellers for 9 out of 11 months this year. They have pulled out about ₹2.7 lakh crore. But, Indian markets have stayed resilient. The Nifty50 has gained 7.5% so far this year. And the retail investor (along with domestic institutions) has played a big role.
Retail shareholding in Indian companies clocked a near 15-year high in June 2022, according to data from the NSE. Post-rate hike, retail shareholding still makes up around 9% in both the Nifty 50 and Nifty 500 Index.
Also, this cash put resources into value can possibly deliver labor and products, add to Gross domestic product (GDP) and make occupations. Because of this, a benchmark index like the Nifty’s growth path frequently reflects the country’s economic expansion.
What makes this flywheel possible? The following are the ingredients that make up the magic formula: a customer-first government and regulatory environment, mass-scale financial literacy, and increased reach through technology.
Increased reach through technology
eachfirst and mobile-first platforms like Upstox made stock buying as easy and intuitive as online shopping thanks to increased technology reach. Equity has made it possible for more Tier2 and Tier3 customers to choose to participate in the capital market and the India growth story by providing a stable and scalable product, a paperless onboarding process, and UPI-based fund transfers. For instance, these non-metropolitan, Tier 1 towns account for more than 80% of Upstox’s customers. In addition, the majority of them have never invested before. This demonstrates the unmet demand for reasonably priced investment opportunities. From Mumbai to Manipur, Bengaluru to Bareilly, individuals have started putting resources into the business sectors, in their future, and in the economy.
Mass-scale Financial literacy
Large-scale Financial Literacy Programs Investment platforms like UpLearn from Upstox, the NSE, governing bodies like AMFI, and “finfluencers” (financial influencers on platforms like YouTube and Instagram) have launched large-scale financial literacy and awareness programs that have sparked a widespread customer interest in learning about investing and trading.
Young workers and college students are now considering “starting early” in their investment journeys. Barriers and fears associated with participating in the stock market are now being broken by access to high-quality investment information.
Environment of customer-first government and regulation In fintech, the government and regulators are the ecosystem’s most important components. This strong momentum is made possible by an open, robust, and forward-looking regulatory framework and government-led innovation.
Aadhar, eKYC, eSign, UPI, Digilocker, and online PAN verification are visionary initiatives that have created the “financial superhighway” necessary for the success of the fintech ecosystem. Other nations around the world are using these platforms as playbooks.
In terms of protecting the customer and lowering risk, our regulator, SEBI, is leading the way. India has pioneered a number of global-first innovations, including T+1 settlement, Demat accounts for all brokers, restrictions on margin lending, strict protections for user transaction data, and others.
The Global Bright Spot:
India India is already regarded as the global innovation center for fintech. India’s GDP is expected to grow at 6.8%, which is more than twice as fast as China and the US; Maybe that’s why the IMF has referred to India as a “bright spot.” You can’t help but agree that this is an economy you should invest in when you consider the government’s push to grow the economy to $5 trillion by 2026 and 2027.